In the latest episode of “CU On the Show,” host Doug English sits down with Samantha Paxson, a seasoned expert in credit union evolution and fintech collaboration. This insightful conversation dives into how credit unions can become more member-centric and significantly enhance their market share through strategic fintech partnerships. Expect to learn about the challenges credit unions face, the potential of embracing fintech collaborations, and actionable strategies for transcending traditional operational models to meet the evolving needs of their members.
Transforming Challenges into Opportunities
Samantha highlights a culture that rewards risk-averse behavior and often results in stagnation. This episode unveils how credit unions, traditionally slow and steady in their approach, are uniquely positioned to leverage fintech innovations—like generative AI and cloud-native platforms—to not only meet but exceed member expectations.
- Understanding the Member Base – The first step toward transformation is gaining a deep understanding of current member segments. Samantha stresses the importance of credit unions having a solid grasp of who their members are, how they utilize services, and their underlying needs.
- Creating Value Innovations – By auditing existing solutions and aligning them with member needs, credit unions can shift from being product-centric to member-centric. This approach involves bundling services that address the specific financial goals of different member personas, thereby fostering a more engaging and personalized member experience.
- Implementing a Data-Driven Strategy – Samantha advocates for a robust data strategy that captures and analyzes member interactions. This insight is crucial for developing services and solutions that capture member attention and meet their needs precisely.
The Strategic Path to Member-Centric Innovation
-
- Fintech Collaboration Techniques – Learn about effective strategies for credit unions to partner with fintechs, enhancing their agility and tech-forward approach.
- Consumer-Centric Solutions – Discover how integrating member expectations into service design can transform the credit union from a mere financial provider to a vital part of members’ financial lives.
- Leadership and Strategic Shifts – Gain insight into how credit union leaders can drive change and strategically position their institutions to thrive in a rapidly evolving financial landscape.
This episode is a must-listen for anyone involved in the credit union sector, from board members and executives to fintech enthusiasts looking to understand the future of member-centric financial services. Dive deeper into the conversation and discover how to transform your credit union into a powerhouse that truly puts members at the heart of every decision.
Samantha Paxson is not affiliated with or endorsed by ACT Advisors, LLC.
Audio Transcription (pulled from the podcast)
Doug 00:29
Welcome to C.U. On the Show I’m your host, Doug English, and joining us today is Samantha Paxson, an expert in credit union evolution and fintech collaboration.
In this episode, we focus on transforming credit unions into member-centric powerhouses through innovative fintech partnerships. We also discuss how credit unions can transcend traditional boundaries, tailor financial solutions, and meet the evolving needs of their members.
Samantha, welcome to see C.U. On the Show. I’m delighted that you’re here and able to join us today for some big bold ideas. Tell us a little bit about your background, Samantha and what you’re working on today. And then let’s get into it.
Samantha Paxson 01:14
Doug, it’s so great to be here. ,I’ve been a big fan of the show for a long time. So, I’m just very excited to talk with you today. I have been in credit unions for 20 years, most recently as the chief experience officer with Co-op solutions, and I am now a free agent who is consulting for both fintechs and credit unions on their growth and transformation strategy. It’s a very exciting time to be in the financial services space and financial technology in really looking at what the consumer is wanting. To help design our organizations to meet those needs, exceed them and grow.
Doug 01:55
So one of the things you said in the research and preparation for this podcast was about how credit unions are challenged with mediocrity. Tell me about that.
Samantha Paxson 02:06
I know that’s kind of a salacious thing to say. But it’s interesting, I serve on the board of a credit union, I serve on the board of many fintechs. And you can really see the difference between the things that are important to management and to boards on the financial services side on the financial institution side, versus the things that are important on the FinTech side. I was chatting with a really good friend of mine in the credit union system leadership space, and he was saying to me, we seem to be rewarded for mediocrity. In the credit union space, we want to make sure that we’re risk averse, that we just don’t mess up, that we’re rewarded for not making a big mistake. Where fintechs, and other players in the financial services space, are rewarded for really exceptional growth. And we are kind of dis-incented to exceptionalism. How do we really lean into being exceptional at what we do in order for us to win more market share and to overcome all of this technology change? Overcome, what is wonderful, which is the empowered consumer, but also be extremely important and useful to that empowered consumer? I think we just have an incredible opportunity to be value innovators right now. This is what fintechs are doing well. We are kind of in this space and we’ve been in this place over the last 20 years of like, slow and steady wins the race. If we just maintain the status quo and don’t mess up, we’re going to be fine. And we’re in this new place of explosive innovation where we have generative AI and cloud native platform models and embedded finance and banking as a service software as a service. Without the consumer at the center. These technologies and tools are just tools. We have an interesting moment to be exceptional for the consumer, so that we can understand them, show up for them and help them with their overall financial performance. So I’d say yeah, maybe we’ve been focused unintentionally on mediocrity. But this is a moment for us to capture our time of exceptionalism.
Doug 04:37
Well, we’ve had a couple of interesting years in the financial markets and in interest rates. Mediocrity in the last few years is continuing to have some earnings at all or losing a tolerable amount. And these fintechs just a completely different world, right, just, you know fast and nimble and maybe not particularly well capitalized. And you know, they’re not run by a board of directors, that is maybe been around for 20 or 30 or 40 years that is kind of schooled in the way that it was five years ago, 30 years ago. How do we overcome that?
Samantha Paxson 05:17
It’s interesting, because you’re right, you are punctuating my point. The lag evidence of interest rates being so volatile, and technology increasing, it has given us is in leadership in the credit union system, a wake up call, that what worked for us then, isn’t going to work for us now. Our set of assumptions have changed. Being strategic is just making a set of new decisions. It’s just making choices. And so it’s interesting, you know, the boards of fintechs are venture capitalists, they are leaders in the financial services space. What happens in credit unions that can be seen as an advantage, they are the makeup of our consumer base, that they are members of our credit unions, and they advocate on behalf of the consumer. We can see that as an advantage. The thing that fintechs have going for them is that their boards are really wanting them to grow, they are really leaning into that growth, and they understand the path to do it. We need to kind of rethink the things that have worked for us in the past, and really put the member at the center of what we do today, consumers, members, consumers, they have really high expectations. All of the brands that they do business with have demonstrated this is the experience that the credit union needs to be able to deliver. And what they really expect right now is their credit union to be their personal financial operating system. Do you understand me? Do you have the technology and the capability to deliver on my short term needs, things like money movement, paying for things, digital engagement, meet me where I am, and meet me in the branch and understand me in both of those settings? And can you help me manage my short term personal financial performance, and my long term personal financial performance, which are things like loans and wealth and helping to meet my retirement needs and helping to save for my child’s education? And will I be okay in both of those realms? So we’ve really been as a movement, leaning on the value proposition of rate. And we’ve been very product centric. Now, we’ve done that in service for the member. But we have the opportunity to really shift the way we think, to think about ourselves as a financial services hub, a personal financial operating system, that meets the consumer meets the member where they are across their entire financial life. We have that opportunity to be the curated, connected ecosystem that provides value across all of the solutions that we provide, based on what the consumer needs. And when we do that, we will get the consumer, the member utilizing us, we will be their primary financial relationship. And they will do more and more and more with us. We just have to connect all of those solutions together in a way that meets the member where they are and demonstrates that we really understand what that consumer needs.
Doug 08:23
Let’s pretend that you are working with a credit union and sort of coaching them on how to go from wherever the member relationship is currently, relative to that credit union into building the systems and services that you just described around the member relationship. How would you go about guiding a credit union to evaluate where they are today? And to move through that continuum?
Samantha Paxson 08:52
Okay, that’s a great question. So the goal, this idea of being a value innovator, and really being exceptional, is that we want to be in the flow of the members everyday life and be there for the big moments. So right now we’re leaning on those big moments like the big loan opportunity every five to seven years, and that’s where we have made our money and been able to really serve the member across the other things that they do. We need to remember the flow of the everyday life. Step number one is deeply understanding your current member base. So many credit unions don’t understand or deeply know their existing member segments. Who are our member segments? How are they utilizing our credit union? What do they need? Do we deeply understand what they need? Do we have their data on how they are transacting? And how does that formulate the set of personas that are in the existing membership base of the credit union?
Doug 09:56
That sounds like a humongous program. How would you actually go about doing that?
Samantha Paxson 10:01
There’s actually a great deal of providers in this space that do this today. Some of our consulting partners that we have in in the space like CS Consulting, like Cornerstone Advisors, I think Engage FI is getting into this. There are several folks in this space, Virtus AI is tremendous. EXL is tremendous. They dig into who are your current members? Let’s first understand that, then you’ve set up a data strategy to understand the behavior of those members. And then what you’re going to learn from that is how are we interacting and engaging, because what we’re trying to do is win probably the scarcest, most elusive opportunity in this space today. Which is consumer attention. How are we winning consumer attention? And then do we have the right solutions to meet that need? Not only are we engaging with them in the right way and interacting with them in that moment? Are we meeting them with the right solution, and being able to serve that up to them based on what they’re trying to do? So step number two, is then auditing your existing solution sets and creating ecosystems of value. How are you putting value bundles together of your existing solution sets based on those personas? I always give the example of my son, he’s 12. He told me at age 11, and I’m sorry if I’m repeating myself, I’ve talked about this. He and his buddies, all go after school, and they go and buy ice cream, or snacks, and they ride their bikes, and then they come home, and he used to carry cash. Most merchants don’t accept cash anymore. He came to me and said, Mom, I want a debit card. I want an app that tracks my spending, and I’m interested in growing wealth, I want an investment account, at age 11. And all of his buddies are talking about this. So when we thought, let’s capture Gen Z, let’s capture millennials, we need to capture the Alpha generation, who are starting to transact younger and younger and younger, and they’re expecting digital transactions. So that is a persona set. What is the new member onboarding journey? What is the first transaction you want them to do? How do they look and assess their overall their short term financial performance? Do I have enough money from my allowance in my account to be able to buy my cookies after school? And then how much am I going to save and put toward wealth creation? Then, guess what, he’s gonna want a car in four years. You’ve been engaging with him all the time? Well, obviously, I’m gonna go to the credit union and go get my loan for the car. It starts an engagement pathway and an interaction model for that persona set, you’re serving up the set of solutions, that that persona needs to manage their short term financial performance, and then you’re preparing them for those big moments, like we talked about earlier. They’re going to be ready to have a loan with you, which then fuels the economic engine of the credit union. That’s one persona. Then there’s the underserved community, you have the high net worth community, you have the person just out of college. There’s really all of these ways to deeply segment your personas, understand what they like, understand what they’re trying to get done in their financial life and be there for them show up for them. Because if not, they’re going to many other places to go do that. The average consumer like Cornerstone Advisors talks about, the average consumer has 40 different financial relationships, we’re expecting to be the preferred financial institution, and those days are gone. But we have this opportunity to be meaningful partners in our consumers, our members life, we just have to show up the right way, with the right solutions, get them engaging with us, and then grow. It takes it to the next level.
Doug 14:16
In our, in our back and forth between planning for the episode, you also mentioned a Next Wave report that really inspired you, talk to our listeners a little bit about that.
Samantha Paxson 14:25
Well, it’s interesting, I’ve had a partnership with EY for about six years. And when I was in my role as the chief experience officer at Co-op solutions, part of my job was deeply understanding our client base. And so we worked with proximately 3,000 credit unions, to help them deeply understand their next best strategic bet to place. Then we wanted to deeply understand the consumer set across all credit unions. So part of my job was understanding client insights, understanding member insights, and then helping Co-op make good strategic choices and helping credit unions make good strategic choices. So EY was a very important partner to us in that effort. I worked with EY, I worked with Faline, I worked with MasterCard. And we were able to put together a proprietary research path that helped us understand what America’s consumers were really looking for in a credit union, what existing members were thinking and what prospective members were thinking. And really what they’re needing is help in their short term financial performance. And their long term financial performance. And what EY has done really well over the last several years is that they have put together this next wave report, which not only studies the financial trends, these new technologies that I brought up earlier, things like embedded finance and generative AI, and all of the you know, cloud based ecosystems. There’s so many other things like shiny objects that we tend to go off or after that are product centric. What’s most interesting is that this next wave report has really talked about the way that you create continuous and ubiquitous connectivity for the consumer, the consumer wants access to everything all the time from any device, and they want their financial institution or the brand that they are working with, to have the ability to understand them. And to give them the ability to also jump between channels via super fluid experiences. So this report really gives the strategic playbook to many leaders about where they should be placing their strategic bets, where they should be looking at micro transactions, things in the every day, versus macro transactions, things that happen every five to seven years, all through the eyes of the consumer. And so I’m really a big believer in the work that they’re doing. And it’s very much aligned with what many other thought leaders are saying in the space. So you know, some of some of the greats out there like Brett King and Jim Marous and Ron Shevlin. And all of these voices that are in our space. They’re saying that we need to show up for, to interact with and to help with the financial goals of the consumer. If we do that our value proposition changes. And that’s our huge opportunity. Our value proposition is not just being the lowest rate in town, our value proposition is helping the overarching financial performance of the member.
Doug 17:40
I googled the words you were saying I Googled EY next wave financial services financial well being report so I was able to bring that right up, it is it doesn’t seem to be behind a paywall. So listeners if you want to find out what Samantha’s talking about, you can do the same thing. EY Next Wave financial services financial wellbeing report, and in that I found it really interesting, it mentions that most trusted financial institutions lead with credibility, and then reliability and then intimacy and having the best interests of the consumer in mind. What are your thoughts around that?
Samantha Paxson 18:19
That to me sounds like a credit union. It comes down to trust. So I’ve talked about this for several years. How do we define trust? My friends will say, Oh, Sam, we’ve heard this before. Trust is not just your character, credit unions have character in spades, we always do what’s right for the member for the most part. But it comes down to capability. When you’re making decisions in your personal life, who do I trust? It’s who do I trust to do the right thing? And then who do I trust to really get it done? There’s a there’s a distinction between those things. So when EY and Next Wave talks about credibility, how are you showing up to demonstrate that you actually have the ability, the technological capability to deliver a needs-based ecosystem? This is this idea of value innovation. How do I focus on what the consumer needs and serve it up to them in a way that they expect? That demonstrates credibility, and that helps to build trust. So we need to focus on are we demonstrating that we really can deliver what the consumer expects, and that we can interweave our services throughout their financial life, through the flow of everyday life to meet that member’s needs, and demonstrate that we can do it? I believe we can do it, we just have to shift our perspective.
Doug 19:47
In your work with fintechs, it’s interesting they’re such different organizations, but credit unions are connected to fintechs. I’ve done an interview on this podcast with Visions Credit Union, where they talked about how they truly partner with the fintechs and share data with them and do some interesting ideas. When you look across the credit union world, and you see the way credit unions are interacting with fintechs, are there any best ideas that you’ve seen for where they can sort of adopt a little bit of the nature of the FinTech? The way they react, you’ve got the fast pace of the FinTech with the slow pace of the credit union. And maybe some of that fast pace could come over and help the credit union to become more nimble and tech folk forward. Any ideas?
Samantha Paxson 20:34
You’re bringing up a really interesting observation. There’s one that I’ve seen in my work with both credit unions and with financial technology services, that both are trying to deliver a dynamic range of services to the consumer, for the ultimate goal of helping them in their financial lives through relevant continuous interactions and engagements that overall help their financial performance. Here’s the chasm that I’m observing. Credit unions want to do this in a way that they have been delivering service through their current operational environment. They have a core provider, they have a digital banking provider, they have a payments platform, they have this tech stack, that they’re delivering solutions that sit on top of those three environments, and then they have this siloed set of operational divisions that are delivering products from that tech stack. Now the consumer looks at that environment and they say, Oh, I have to go talk to the loan division. Then I got to talk to the retail division and then I need to talk to the payments division. There is not this intersection of those divisions where they work in an algorithmic way. So there’s a gap there on the credit union side. The FinTech side just says we made the technology work, we’re set. And then we should get scale because we made the technology work. The opportunity is to bring the full experience the full interaction model, the full operating model, the full tech stack and integration model together between the FinTech and the credit union to actually achieve growth for the credit union and actually achieve scale for the fintech. This is a chasm that exists today that, this is where I’ve been putting my energy is actually in the ways that I’ve been advising fintechs and also helping credit unions is helping them to build this environment of trust for the consumer. We just talked about, are we credible? Are we providing functional benefits, a strong reputation, premium value in a way that a consumer wants to engage? Are we reliable? Is our technology digital? And is that experience completely thought through from the time that that you engage with a member through them actually interacting and executing the transaction that they’re wanting to do? Intimacy is the next one. Are we anticipatory? Are we providing exceptional service across what that particular product or technology is delivering? And then best interest best intent for the consumer. Are we aligned with that consumers person about values? Are we helping them with their overall financial performance? Are we consumer centric, when you put those things together in the way that we’re operating as a united front as a management team, in the credit union, to deliver that kind of service, those kinds of exceptional experiences, and we leverage fintechs to bring them into our environment and really design the entire end to end experience for the consumer. Are we doing that to move from kind of an under differentiated market taker for this very empowered consumer to an exceptional member centric market maker?
Doug 24:03
From a structural standpoint, do you see that as the credit union is the customer and the FinTech is a service provider? Or is there an equity connection between the two entities? Or what is the structure that you’ve seen that kind of allows the two entities to truly connect and to get to this substantial place of change that you just described?
Samantha Paxson 24:28
Well, it’s interesting, I’m seeing both. There are many providers in our space, like Curql, like The Receda Group that are doing this, that they are doing tremendous work in sourcing and vetting fintechs, because credit union leaders don’t necessarily have the bandwidth to be able to do that. They’re sourcing and vetting fintechs. And they’re creating investment opportunities for credit unions. The question I have, and that many credit union leaders have, is that okay, what’s my return on investment and providing investment into these fintechs? And is it in a financial ROI? Or is it a long term play to bring those use cases that we can’t build ourselves into the credit union environment? And I’d say it’s a little bit of both that I’m seeing credit unions invest in fintechs, because they know they need to, they need to bring innovation into our space, because we don’t necessarily have the capital that it takes to be able to go and build everything ourselves. And then we can partner and I mean, truly partner, and that’s the second part of your question. How do you truly partner with the fintechs, not just having them provide the widget or the technology, but deeply and strategically understanding the way that that widget would fit into the operating environment, to encourage usage. If you build it, they will come strategies don’t work. That’s a product centric approach. We need a member centric approach to deeply understand how that remember utilizes all of these solutions, fit them together in a way that makes sense for that consumer’s short term financial performance, what are the jobs that that consumer needs to get done? And how do we then design these in ecosystems of value, that’s what I like to say, put these together in journeys that the consumer is trying to do in their financial life, and then create usage. When you do that the FinTech gets scale. The credit game gets growth, they understand the interdependence between deposits and all of the different solutions that they have to increase revenue. And then we’re actually embedded in the consumers financial life, and it’s a win win for everybody. But I’m seeing both, I’m serving as a strategic advisor for CU Wealth Next, which is a very exciting digital wealth tech aggregator that is bringing in different wealth use cases into one central technology environment, and making it possible for credit unions to bring that into their technology environment and offer those use cases to members so that they are the provider for wealth support. And its democratizing wealth creation, this is really only used or primarily offered to high net worth individuals. Everyday members need to think about their short term and long term financial performance. How are we making that possible for members? This is a pretty underpenetrated space. We have it from a personal standpoint with great providers, like LPL Financial, where are we doing it on the digital side, to have people be able to invest in stocks and real estate and crypto and all of these other use cases that are out there, based on what the consumers overall comfort level is? And I think this is a place that credit unions can really innovate, because the consumer is going to Robin Hood, they’re gonna go find the use case. How can we provide that and make that possible for the member and have them see their credit union as the place to go for this? It’s just that kind of thinking that we need to bring into the credit union space. And it’s really a shift in thinking for credit union leaders, but I know these credit union leaders can do it, because we focus on the member all day, every day. And that’s embedded in who we are as leaders. So I’ve got great faith in our movement to do that.
Doug 28:29
As do I and that’s part of what this podcast is about is to try to give the listeners ideas that they can go and then act on. So, you mentioned the name of several providers of companies that can help a credit union to understand their member data, and be able to start to move the credit union with a member as the center of all the strategies that are going on within the credit union. And then Curql, that has been on this podcast and others have talked about lots of different ways of investing in fintechs, to try to identify what’s next and pay attention to what’s being developed there and figure out how that mirrors with your credit union or perhaps you partner with them directly. What other areas should credit union leaders be listening to, to look for these ideas that can help them to put the member at the center of the ecosystem?
Samantha Paxson 29:25
What we need to do is aim in a way that we haven’t necessarily behaved.
Doug 29:30
That sounds like a hard thing.
Samantha Paxson 29:31
It’s not that hard. The way that we typically operate is we look at our financial performance. And we look at our income statement and our balance sheet and we look at product line performance. What I am encouraging credit union leaders to do is to look at member level performance, group those members into personas, understand their journeys with the credit union, and then map those products to the consumer side. When you’re able to do that you find the gaps in your service delivery, you find the gaps in the experience delivery, and you’re able to deeply understand, more clearly understand, where you need to be partnering with fintechs, where you need to build the capability yourself where you need to make investment decisions in order to grow relationships. Our goal here is to grow the personal financial relationship with the member. We want to be the personal financial operating system for the member. So we need to focus on the member, understand the member, listen to the member, not just listen to what technologies are there. Technologies are the tool you use to get there. Let’s not focus on the technology. Let’s focus on the member. When we do, we can make sure that we win that members relationship moment by moment interaction by interaction. When we win that and see the path to delivery there. We can then enter new markets with that formula. We’re going to we’re going to win and deepen the interaction, the relationship, the revenue, to be able to serve that member and that member base and then be able to enter new markets new spaces to deliver that same strategy. It requires a bit more thinking a bit more mental gymnastics, it’s not just looking at product line P&L. It’s looking at the one P&L of the credit union and that’s focused on the financial performances of our member base and they better be doing the majority their financial services with us, instead of having to go to all of these different providers, 40 different financial relationships, which makes it that the member doesn’t understand their personal financial performance. They are just knowing that I gotta go a lot of places to get what I need to get done done. Let’s have them come to credit unions. So let’s focus on the member, the member is the P&L. That’s how we’re going to grow.
Doug 31:59
Thank you, Samantha, for these great ideas. I think this sort of thinking is the key to helping the credit union movement, close that gap between where we are now and putting the member at the center of the experience. Thanks for your ideas and your long history in the credit union movement. I am sure we will see Samantha Paxson running an organization or at a high level of several organizations in the credit union movement very soon.
Samantha Paxson 32:24
Thank you, Doug. It’s been a pleasure to be here. And I just love talking about this. Thank you for having me on the show, and I can’t wait to engage with more credit unions and watch their performance just flourish because we need to be the most essential type of financial services in the space today and I know we can do it.
